Does Vertical Integration Facilitate Downstream Collusion?

• Main Authors: Ou, Yi Fen, 歐宜芬
• Other Authors: Wen, Wei Jen
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/99177768098206280093

碩士 === 國立政治大學 === 國際經營與貿易學系 === 104 === This research investigates the emergence of downstream cartel in vertically-related industries by using successive Cournot oligopolies. The results show mergers’ paradox exists to circumvent the formation of downstream cartel with few firms in both upstream and downstream. Besides downstream firms would have less incentive to form a cartel organization when competing with an independent vertically-integrated firm in the industry relative to the industry without a vertically-integrated firm. The vertical integration would lessen the downstream cartel collusion as well as circumvent the double marginalization problem. The reason is that vertically-integrated firm would have huge gain from the ease of double marginalization and enjoys cost advantage to dominate the downstream market. The emergence of vertically-integration firm would in turn weaken the competitive advantage of those cartel firms in the downstream market. On the other hand, the firm betraying from the cartel would suffer much less punishment from the grim strategy conducted by the cartel facing vertically-integrated competitor in the downstream market. However, the gain from betraying the cartel would be much greater since every cartel firm would only produce less originally facing the vertically-integrated competitor. Therefore, the downstream cartel would be difficult to substantiate and the downstream market would maintain its competition. In this situation this paper contributes to a justification that the existence of vertically-integrated firm would be welfare-improving.